Twitter Soars in Debut

By Dimitra DeFotis

Twitter stock is trading at $45.69, which reflects a 75.7% rise from the $26 offering price.

The newly-minted public shares of Twitter (TWTR) opened at $45.10 per share, well ahead of conservative predictions.

Twitter sold 70 million shares in its initial public offering, raising $1.8 billion afterthe offering price was set Wednesday night. At a price at or above the opening, the profitless social media darling has a rather astounding market value of somewhere above $31 billion.

To determine the value of a company like Twitter without earnings, investors and analysts are calculating a multiple relative to sales. That metric now reflects a significant premium to companies like Facebook (FB), LinkedIn (LNKD) and Yelp (YELP). Sterne Agee analysts calculate that at a $27 price, Twitter’s multiple of enterprise value to estimated 2015 sales is 11.8 times, compared to 8.5 times for high-growth peers.

Yet many Wall Street analysts are quiet today, despite their penchant for publishing on the slightest corporate news. Those whose firms are involved in the offering may be limited in what they can say. But others aren’t going out on any limbs in the first hours of the IPO, or didn’t bet on a $40-something price.

“Twitter would make more sense between $18 and $20. A $31 billion market cap is really too much. For investors, pick your price. Wait until the February or May lockup expirations. Many venture capitalists, founding investors, will be wanting to sell their shares,” said Hilary Kramer, chief investment officer at A&G Capital in an interview on Bloomberg at noon today. “You will see Twitter bottom out as Facebook did, and then come back.”

“I believe you will see the banks support Twitter in the 40s today.”

No one wants to see Twitter shares flop a la Facebook – traded on the NASDAQ — in its public offering. It was one of the largest IPOs in history, but the shares fell to earth from their initial highs.

Twitter stock didn’t start trading with the rest of the New York Stock Exchange listings at 9:30 a.m. Market makers were busy matching buyers and sellers. Bloomberg intially reported the Twitter bid was $40 and ask, $44. At around 10:30 a.m., NYSE officials said the stock could open “between $45 and $47,” according to the Wall Street Journal.

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There are 3 comments

NOVEMBER 7, 2013 10:55 A.M.

Anonymous wrote:

man , was I wrong about that.

NOVEMBER 7, 2013 11:07 A.M.

VARINVEST wrote:

The dotcombubble all over again,poor gamblers.

JUNE 22, 2015 3:41 A.M.

http://pl.iacaiberry.info/ wrote:

The very heart of your writing while appearing agreeable in the beginning, did not settle well with me personally after some time. Someplace throughout the sentences you actually managed to make me a believer unfortunately just for a very short while. I still have got a problem with your leaps in assumptions and one might do well to help fill in those gaps. When you actually can accomplish that, I will surely be fascinated.

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Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.